Investment Rule #1: Invest During Strong Trends and Let Your Profits Run

Many investors and traders get caught up with the day-to-day gyrations and noise of the financial markets. Market timing is at best a game of chance; ask any market "technician" to cover the right side of a chart with a piece of paper, and then forecast what will happen as that paper is removed to reveal the actual market activity. Directionally, the forecast might be correct. But was it correct in the timeframe expected? Jumping in and out of the financial markets based on the expectation of a trend change within a certain timeframe is a 50/50 proposition.

Furthermore, beware of market technical indicators that can often be misunderstood and improperly applied. For example, during a strong trend, you may hear from a market technicial that the market is "overbought." While that may be true, is it worth moving out of stocks for what might transpire as a minor short-term trading range? Technical indicators should be considered in the context of the prevailing trend. It is often better to "dumb down" the plethora of technical signals and keep it simple.

How does Baseline Analytics TrendFlex include Investment Rule #1 in its investment strategy? TrendFlex does use a handful of technical analysis signals as part of its strategy. But since TrendFlex is a trend-following system, short-term technical signals are used to assess the risk of the current trend changing. Typically, during a strong trend, a shift in the direction of the market (often confirmed by short-term technical signals) will not signify a true trend change. Baseline Analytics utilizes a "longer-term" blend of technical signals designed to keep an investor on the right side of the market. TrendFlex helps define the risk of a trend change and suggests a variety of actions to help protect profits as the trend weakens.